Minnesota's Snowbird Tax

Spend most of the year in St. Pete, pay the government in St. Paul.

Jan. 31, 2013 7:28 p.m. ET

You may have heard it can get cold in Minnesota in January, or for that matter in April. Last week the temperature dropped to seven below zero in the Twin Cities, which is one reason many Midwesterners head to Florida or Arizona for the winter. But now Governor Mark Dayton wants to tax the snowbirds even if they are no longer legally state residents.

"There is a snowbird tax—absolutely," the Democratic Governor told reporters the other day. "It's one of the unfairnesses that somebody can spend six months and one day out of the state and pay no state personal income taxes and come back here and take advantage of all the state has to offer for five months and 29 days. So, yes, there's a snowbird tax."

Details are sketchy, but the idea is to tax these nonresidents on their income from stocks, bonds, capital gains and dividends if they spend at least 60 days in Minnesota a year. Income earned in the state is already taxed regardless of residence status, but many retirees or vacationers own a home in the state and live there only for the summer.

The new tax would hit income not earned in Minnesota by those who don't currently spend the requisite six months and a day in the state to qualify as a taxable resident. So, for example, if you returned to the land of 10,000 taxes only for July and August, you'd suddenly have to pay the taxman in St. Paul on dividend checks sent to your main residence in St. Pete.

The state Revenue Department won't say how many snowbirders the new tax would hit, but it predicts the tax would raise $30 million over two years. That's barely an asterisk in Mr. Dayton's new two-year budget of $37.9 billion, especially since it may drive more residents to leave the state permanently.

The hassle factor will be enormous, with the taxmen presumably demanding proof of location during the year via the likes of airline tickets and golf or restaurant receipts. When revenue invariably doesn't meet expectations, maybe Mr. Dayton can require a GPS locator for grandma's cellphone.

But then as the Governor's line about "unfairnesses" attests, raising revenue isn't the point of this exercise. The goal is to punish people for the sin of being able to afford to travel south for the winter.

The snowbird smackdown is part of a larger Dayton tax grab proposing to lift Minnesota's personal income tax rate to 9.85% from 7.85% on income above $150,000 for singles and $250,000 for joint filers. Congrats to midlevel corporate types in Edina—the Governor says you're rich. Minnesota's income tax rate would be the country's sixth highest.

Mr. Dayton says his plan would produce "fair, progressive and sustainable" tax revenue, by which he means everyone pays more, because he also proposes lowering the sales tax to 5.5% from 6.875% but collecting more money by expanding its reach to everything from clothing to over-the-counter drugs and business services. The $2.1 billion in additional new revenue would finance a nearly 8% increase in state spending.

Minnesota Republicans were wiped out in November's elections, so the Democrats who run St. Paul will have to decide if they want to define themselves as tax increasers the minute they get all the power. Then again this is what Democrats everywhere do these days.

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